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Experts shoot down proposed Agriculture budget

“My grandfather used to say that once in your life you need a doctor, a lawyer, a policeman and a preacher but every day, three times a day, you need a farmer’’ –  These are the words of one of the most celebrated global modern day famers, mentor and motivational speakers Brenda Schoepp.

These words were reiterated here in Botswana this week by different stakeholders when the paramount importance of Agriculture was discussed in relation to the 2018/19 Budget proposal which was presented to Parliament on Monday. Commentators have expressed concern in regard the little money allocated to Agriculture by government. This year Agriculture has only been allocated 3% of the overall budget, which is a far cry from the 10% ceiling, which the regional standard.

According to experts and agricultural advocates the lack of adequate budget to the agriculture sector subsequently means no infrastructure development to support the sector, no road networks to connect farm lands with market places, no development of innovative solutions in response to climate challenges facing the sector. 

At the First National Bank Botswana(FNBB) Budget Speech Review held at the GICC on Tuesday, just a day after Minister of Finance & Economic Development, Kenneth Matambo delivered the 2018/19 Budget Speech, various speakers made the same call – the money proposed for agriculture is way too little. 

The common denominator in various submissions by different speakers centred on the fact that agriculture has demonstrated before (through numerous scientific studies and economic research findings) that the sector is a potential remedy to Botswana’s economic diversification headache.

At  independence Agriculture contributed over 30 % to the country‘s Gross Domestic Product (GDP); but today the sector has been relegated to a mere 2 % replaced by  the lucrative Diamond  & Tourism industries . Pre-Independence Batswana lived out of pastoral and arable farming – today the sector is still the source of livelihood for many ordinary Batswana especially those in the rural settlements. The major concern is that on a national scale Botswana cannot feed her 2 million people. The country still imports over 50 % of almost every food commodity predominately from neighboring South Africa.

Minister Matambo announced a 1.34 billion pula budget proposal for the Ministry of Agriculture in the recurrent budget, this will not bring any significant improvement to the sector that supposedly should be feeding Batswana. This has been referred to as underfunding by Botswana Agricultural Marketing Board (BAMB) head of Agronomy, Lambani Obuseng.

Obuseng expressed his concern in the morning session of the budget review which tackled issues in the sectors of agriculture & energy. He said it was pivotal for the government to review the 3 % expenditure which is not enough to develop and resource agriculture sector.

It emerged at the session that Maputo declaration of the 2003 African Union Summit dictates that member states need to spend at least 10 % of their total budget on Agriculture. “Botswana has not been doing that for years since this agreement, it’s a cause for concern,” observed Obuseng. 

The Agronomist also said that Agriculture was a complex sector especially when a country wants to produce on a large scale and promote commercial farming. He said with unfavorable and evolving climate conditions Botswana must move with times and be innovative to realize significant contribution of this sector on the economy.

“Modern day farming technology requires capital and to produce on large scale requires capacity, and that is to say there has to be deliberate spending and will from government side to resource these requisites,” he said. Obuseng further observed that though government has tried with a number of initiatives in the past years to grow the agricultural sector, it continued to decline as a result of certain operational challenges that continue to besiege the sector.  Some of these challenges include but not limited to poor soil fertility, dependence on simple manual tools, low adoption levels of agricultural technology and poor infrastructure.

Adding to Obuseng’s views, Clover Botswana General Manager, Mike Joyner observed that the funds allocated to the agriculture sector were inadequate. “This 3 % is against a number of propositions adopted in different regional foras. The SADC strategy on agricultural development submitted that agro-processing was a key sector for development. You cannot develop agro procession with this kind of un-prioritized funding that leaves agriculture with the remains of the budget,” he said.
 


Renowned Beef mogul, Mr Clive Marshall shared on the challenges facing the beef sector such as low returns for cattle producers and lack of market access. He said for Batswana to venture into beef processing and get in feedlots operation in large numbers funds must be availed by the government.

In the main event of the FNBB Budget Review  staged in the evening, just before speakers from different sectors of the economy took the podium to dissect and interact on Budget speech, the  FNBB Chief Executive Officer, Steven Bogatsu took the stage and hit hard on what he termed lack of will from Government to develop the agriculture Sector . In his welcome remarks, Bogatsu sent a message to government enclave: “why do we still spend less on agriculture while the sector has proven beyond reasonable doubt to be able to create jobs?”

 Bogatsu further said it was irrational to continue spending money on importing agricultural produce year and year out while we can inject funds in developing our own sector and produce food. The FNBB CEO also touched on the beef industry, “why do we still operate Botswana Meat Commission in this model while it was making losses year and year out?” 

Bogatsu cited Botswana-De Beers relationship as a benchmark model, “we have a good relationship with multinational corporations like De Beers. Why can’t we adopt the same model for BMC and take the beef industry to the next level?”
Government was advised to seriously consider reviewing the budget proposed for agriculture.

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Botswana records first trade surplus since January

7th October 2021
Botswana-records-first-trade-surplus-

Botswana has recorded its first trade surplus for 2021 since the only one for the year in January.

The country’s exports for the month of July surpassed the value of imports, Statistics Botswana’s July International Merchandise Trade data reveals.

Released last Friday, the monthly trade digest reports a positive jump in the trade balance graph against the backdrop of a series of trade deficits in the preceding months since January this year.

According to the country’s significant data body, imports for the month were valued at P7.232 billion, reflecting a decline of 6.6 percent from the revised June 2021 value of P7.739 billion.

Total exports during the same month amounted to P7.605 billion, showing an increase of 6.1 percent over the revised June 2021 value of P7.170 billion.

A trade surplus of P373.2 million was recorded in July 2021. This follows a revised trade deficit of P568.7 million for June 2021.

For the total exports value of P7.605 billion, the Diamonds group accounted for 91.2 percent (P6.936 billion), followed by Machinery & Electrical Equipment and Salt & Soda Ash with 2.2 percent (P169.7 million) and 1.3 percent (P100.9 million) respectively.

Asia was the leading destination for Botswana exports, receiving 65.2 percent (P4.96 billion) of total exports during July 2021.

These exports mostly went to the UAE and India, having received 26.3 percent (P1. 99 billion) and 18.7 percent (P1.422 billion) of total exports, respectively. The top most exported commodity to the regional block was Diamonds.

Exports destined to the European Union amounted to P1.64 billion, accounting for 21.6 percent of total exports.

Belgium received almost all exports destined to the regional union, acquiring 21.5 percent (P1.6337 billion) of total exports during the reporting period.

The Diamonds group was the leading commodity group exported to the EU. The SACU region received exports valued at P790.7 million, representing 10.4 percent of total exports.

Diamonds and Salt & Soda Ash commodity groups accounted for 37.8 percent (P298.6 million) and 6.2 percent (P48.7 million) of total exports to the customs union.

South Africa received 9.8 percent (P745.0 million) of total exports during the month under review. The Diamonds group contributed 39.9 percent (P297.4 million) to all goods destined for the country.

 

In terms of imports, the SACU region contributed 62.7 percent (P4.534 billion) to total imports during July.

The topmost imported commodity groups from the SACU region were Fuel; Food, Beverages & Tobacco, and Machinery & Electrical Equipment with contributions of 33.3 percent (P1.510 billion), 17.4 percent (P789.4 million) and 12.7 percent (P576.7 million) to total imports from the region, respectively.

South Africa contributed 60.1 percent (P4.3497 billion) to total imports during July 2021.

Fuel accounted for 32.1 percent (P1.394 billion) of imports from that country. Food, Beverages & Tobacco contributed 17.7 percent (P772.0 million) to imports from South Africa.

Namibia contributed 2.0 percent (P141.1 million) to the overall imports during the period under review. Fuel was the main commodity imported from that country at 82.1 percent (P115.8 million).

During the months, imports representing 63.5 percent (P4.5904 billion) were transported into the country by Road.

Transportation of imports by Rail and Air accounted for 22.7 percent (P1.645 billion) and 13.8 percent (P996.2 million), respectively.

During the month, goods exported by Air amounted to P6, 999.2 million, accounting for 92.0 percent of total exports, while those leaving the country by Road were valued at P594.2 million (7.8 percent).

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Business

The 2021/2022 Stanford Seed Transformation Program Begins

7th October 2021

Founders from twenty companies have been accepted into the program from Botswana, Namibia, and South Africa

The 4th Cohort of the Stanford Seed Transformation Program – Southern Africa (STP), a collaboration between Stanford Graduate School of Business and De Beers Group commenced classes on 20 September 2021. According to Otsile Mabeo, Vice President Corporate Affairs, De Beers Global Sightholder Sales: “We are excited to confirm that 20 companies have been accepted into the 4th Seed Transformation Programme from Botswana, Namibia, and South Africa. The STP is an important part of the De Beers Group Building Forever sustainability strategy and demonstrates our commitment to the ‘Partnering for Thriving Communities’ pillar that aims at enhancing enterprise development in countries where we operate in the Southern African region”. Jeffrey Prickett, Global Director of Stanford Seed: “Business owners and their key management team members undertake a 12-month intensive leadership program that includes sessions on strategy and finance, business ethics, and design thinking, all taught by world-renowned Stanford faculty and local business practitioners. The program is exclusively for business owners and teams of for-profit companies or for-profit social enterprises with annual company revenues of US$300,000 – US$15million.” The programme will be delivered fully virtually to comply with COVID 19 protocols. Out of the 20 companies, 6 are from Botswana, 1 Namibia, and 13 South Africa. Since the partnership’s inception, De Beers Group and Stanford Seed have supported 74 companies, 89 founders/CEOs, and approximately 750 senior-level managers to undertake the program in Southern Africa.

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Minergy overcomes challenges – improves revenue and produces record breaking coal sales to date

7th October 2021
Minergy

Minergy, the coal mining and trading company with the Masama coal mine, this week released results for the year ended 30 June 2021. The company achieved revenue of P193 million (2020: P81 million) with significant improvement in sales volumes surpassing 415 000 tonnes sold for the year.

The performance was divided into two distinct periods with very different operating environments. The first eight-month period (July 2020 – February 2021), was negatively impacted by delayed funding, COVID-19 impacts and excessive rain; and the last four-month period (March – June 2021), was a more stable production environment moving toward nameplate capacity.

According to Minergy CEO, Morné du Plessis, production and sales initially recovered in July and August 2020 with the easing of COVID-19 restrictions and recoveries were further bolstered by the successful launch of the rail siding. Delays experienced in concluding the funding contributed to contractors limiting operations to manage arrears.

“However, the heavy rains we experienced from December 2020 through February 2021 flooded the mine pit making access difficult and impacting both production and sales. Fortunately, the rain subsided in March 2021, and we entered a more stable environment, with a positive impact on operations. Good recoveries in production and sales were experienced during the last four-month period of the year, with the mine moving closer toward a breakeven position.”

“Despite these operational constraints, including the effects of COVID-19 on logistics and manning of shifts, we expect to reach consistent nameplate capacity in the 2022 financial year,” du Plessis added.

FINANACIAL REVIEW

In addition to the revenue reported above, the company incurred costs of sales of P256 million (2020: P150 million) with operating costs of P23 million (2020: P31 million). This effectively resulted in an operating loss of P86 million (2020: P100 million). Finance costs of P51 million (2020: P17 million) were incurred, bringing the net loss before taxation to P136 million (2020: P117 million).

Du Plessis explains that the adverse conditions in the first eight-month period contributed to 86% of the gross loss, while the more stable four-month period alone contributed to 50% of total sales value, helping to decrease monthly gross losses, albeit below breakeven levels.

The company benefited from a strengthening in the South African Rand (“ZAR”) supporting higher back-on- mine sales prices.

“As announced, we’re pleased to have secured P125 million of additional convertible debt funding through the Minerals Development Company Botswana (Proprietary) Limited (“MDCB”). Minergy remains grateful for this support.”

He added that the first tranche of additional funding provided by the MDCB had been received in December 2020, which allowed Minergy to settle the majority of the contractor’s arrears and allowed their teams to be remobilised. The second and final tranche was paid post the financial year-end and will allow the business to reach nameplate capacity in the new financial year.”

COAL SALES AND MINE PERFORMANCE

Sales volumes increased by 110%, supported by increased sales in Botswana and internationally in South Africa and Namibia. Sales for June 2021 exceeded 56 000 tonnes, a record since the inception of the mine, with pricing increasing late in the financial year on the back of buoyant international prices and a strengthening ZAR.

Minergy also concluded a further 12-month off-take agreement to the existing off-take agreement, with a further agreement finalised post year end.

Overburden moved during the reporting period increased by 86% and extracted coal by 50%. Coal mined in June 2021 alone exceeded 100 000 tonnes. “This is a good performance considering the challenges faced such as sacrificing pre-stripping activities for a period to manage arrears, excessive rain and COVID-19,” du Plessis indicated.

“The wash plant was initially starved of coal due to the factors noted already. Despite this, overall plant throughput performance was 37% higher than 2020. Consistent output was supported by the completion of the Stage 2 rigid crushing section as well as the water saving dewatering screen with filter press contributing to a reduction in water usage of 60% per tonne of coal. A record throughput of more than 84 000 tonnes was achieved in March 2021 and this consistency has been maintained.”

OUTLOOK

According to du Plessis, the completion of Stage 4 of the Processing Plant, the rigid screening and stock handling section, remains a key optimisation step, which has associated benefits. “The completion was unfortunately delayed by a southern African wide shortage of structural steel but was commissioned post year-end.”

Minergy expects the positive momentum in international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market in favour of lucrative international markets. Du Plessis added that the regional market is currently under- supplied with sized coal, which supports higher pricing and new customer opportunities for Minergy.

“Our objective for the 2022 financial year is to achieve nameplate capacity by completing final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business at breakeven or better. The bullish coal market is also providing support. COVID-19 will still be closely managed, and we look forward to the lifting of the State of Emergency, as announced, and trust that vaccination programmes will achieve herd immunity in Botswana during the next 12 months.”

Du Plessis expressed his excitement on prospects stating that, “The Eskom due diligence process is continuing, and we are hopeful of receiving feedback during the current financial year. In addition to this opportunity, Minergy is also investigating participation in the request by the Government of Botswana to provide a 300MW power station for which the company has been shortlisted.”

The approved process to issue shares for cash is showing positive leads and he concluded by saying that a listing in London is still being investigated.

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